Latest Stories

Latest Stories

AuthorSReply

Related

TOPICS

Uncategorized Article

LETTERS

MORE
WAYS IN THE MAZE I very much
enjoyed reading the article, 
The Choice-of-Entity Maze  (March 07, page
64). Perhaps we should also consider the
difference between the liability protection of a
corporation and that of an LLC from lawsuits or
other claims directed against owners of these
entities.

A corporation generally
protects shareholders from lawsuits directed
against the corporation; it does not necessarily
protect corporate assets from lawsuits directed
against the shareholders. On the other hand, in
many states, the exclusive remedy available to a
creditor against an LLC membership interest
involves collecting monies from a debtor-member,
without disrupting the LLC business or other
solvent members.

Nanda
Senathi, CPA, CMA
Hermosa Beach, Calif.

Authors reply: The letters author raises a good point.
However, I do not think as accountants we
should, or even can, expand the discussion on
liability protection other than to recommend
that clients consult with an attorney to
properly address the nuances of the liability
protection offered by a corporation versus an
LLC .

However, there was one
error in the section devoted to 8(a) Designated
Small Businesses. The article stated that 8(a)
firms are not required to participate directly in
providing the goods or services. I would encourage
all businesses and CPA firms to review the FAR
clauses closely as some of these clauses do in
fact require a certain level of participation by
the 8(a) business for particular NAICS codes. The
most significant relevant FAR clause is 13 CFR
125.6.

Additionally, I would recommend
any CPA firm interested in expanding into this
market contact the nearest Defense Contract Audit
Agency branch or review the information at the Web
site (
www.dcaa.mil ). DCAA has extensive
information for contractors (and CPA firms serving
them) that detail reporting requirements. These
reports, including accounting surveys, financial
capability, incurred cost and others, are a very
lucrative and valuable service for a CPA firm to
offer. Thanks again for the excellent publication.

Denise Smith, CPA Athens, Ala.

Authors reply:
Thank you very much for the insightful comment
about the DCAA reporting requirements. This is
another excellent area for CPAs to provide
assistance to small businesses in government
contracting that deserved mention in the
article.

With respect to
8(a) entities, you are correct that federal
regulations encourage 8(a) firms to participate
in the performance of contracts awarded under
the 8(a) program to the fullest extent possible.
However, the standards apply to the joint
venture, not the 8(a) entity. The 8(a) joint
venture program is designed to help eligible
8(a) businesses build capacity and expertise
over an extended period with the goal that they
will eventually be able to provide 100% of those
products and services in the future. We intended
to describe a situation in which a small
disadvantaged firm enters into a joint venture
with a large firm under SBAs mentor program.
The joint venture, once approved by the SBA,
becomes an eligible 8(a) entity for contracting
and performance purposes.

Charles Sparks, CPA, Ph.D. Fairbanks, Alaska

PERHAPS
NOT HOME FREE The first
example in 
Home Free  (Jan. 07, page 40) might not
qualify for section 1031 deferral of capital gain
as the article stated.

The IRS has
used the intent of the taxpayer, predominant
use and rental-property rules to determine when a
property is held for productive use in a trade or
business or for investment. That means that in the
two years leading up to sale, if the taxpayer
utilizes the property for pleasure more than 14
days each year or more than 10% of the rental
period (the greater of the two is permitted), the
IRS may take the position that it was
predominantly a personal-use asset and deny
deferability.

We generally advise
clients to live in the property for two years and
then rent it for two years just before sale. The
replacement property should be rented for two
years, with less than 14 days or 10% usage; then
it can be converted to primary use after
qualifying for the completion of the 1031.

George M. Christofely, CPA Ocean City, N.J.

Give Us Your Feedback Letters should be no longer than
500 words and may be edited for length
and clarity. Please include your
telephone number, city and state of
residence and e-mail address.

The results of the 2016 presidential election are likely to have a big impact on federal tax policy in the coming years. Eddie Adkins, CPA, a partner in the Washington National Tax Office at Grant Thornton, discusses what parts of the ACA might survive the repeal of most of the law.